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Tuesday, The Stellar Foundation announced it had obtained a Sharia Compliance Certification, making it the ‘first distributed ledger technology’ to do so, and cementing its entrance into the Islamic financial world. The certification covers the Stellar technology (XLM) and Network, and propels Steller’s vision of providing “low-cost financial technologies to serve all geographies, ethnicities, wealth classes, and religion.”
The license was provided by the Shariya Review Bureau, an international Sharia consultancy certified by the Central Bank of Bahrain. The consultancy granted the Sharia-compliant license to Stellar after reviewing the foundation’s technology usage, operations, and applications, allowing Steller to deploy its blockchain-based solutions in jurisdictions that run on Sharia-based financial systems.
A Stellar Solution in Sharia-oriented Finance
The accreditation allows Stellar entry into the Islamic financial world, an ecosystem that requires financial institutions to be Sharia compliant. This development opens new markets for the foundation, including the financial ecosystem of the Gulf Cooperation Council, the Middle East, and Islamic-oriented parts of Southeast Asia.
For the GCC and MENA regions and especially for foreigners, this license offers an easy international remittance gateway, and statistics on financial activities in these regions indicate the need for a blockchain-based solution like Stellar.
Total outflows in the MENA region stands at $US109.2 Billion, the GCC accounts for 17.2 percent of global remittance, with Saudi Arabia and the UAE leading in international remittance in the region. Stellar’s decentralized financial system has proven to be one of the best remittance ecosystems on the blockchain; allowing for easy, international money transfer at near zero costs. Permitting Sharia-oriented regions like the GCC and MENA to integrate Stellar into their financial systems enables the easy and cheap movement of money across the globe.
Is Stellar’s Sharia Compliance a First?
Though Stellar touts itself as the “first DLT to receive Sharia” certification, other cryptocurrencies and blockchain startups became Sharia-compliant earlier. One such organization is IncuBlock, a South Korean blockchain lab which, last month, signed an MOU with the Malaysian government for permission to develop blockchain technologies under Sharia law.
In April, Bitcoin was equally recognized as Sharia-compliant according to a report by Muhammed Abu Bakr, a Sharia advisor to fintech Startup Blossom Finance. And in March, NoorCoin dubbed itself “the first sharia-compliant utility token” after it received a Sharia Certification from the World Sharia Advisory Committee.
Whether it’s Stellar, IncuBlock, or NoorCoin—cryptocurrencies and blockchain technologies will need to receive Sharia compliance to operate in regions that observe Islamic law. What is certain, is that these startups have modeled a process for establishing Sharia compliance for cryptocurrency and blockchain projects, which others can now follow.